Rolls-Royce lifts stakes in engine maintenance centres
LONDON, Nov 23 (Reuters) - British engineering company Rolls-Royce, under pressure after a series of profit warnings, said it would increase its stakes in two aero-engine maintenance centres as part of a plan to improve competitiveness.
Rolls-Royce said on Monday it would invest a total of $206.5 million to bring to 50 percent its ownership of maintenance centres (AMC (Taiwan OTC: 3585.TWO - news) ) headquartered in Singapore and Hong Kong, and bring in new agreements to make its three AMCs vie for new work.
New (KOSDAQ: 160550.KQ - news) chief executive Warren East, four months into the job, has said the company must cut costs and be overhauled to better adapt to changing markets.
Shares (Berlin: DI6.BE - news) in Rolls-Royce have plunged 15 percent since Nov. 11, the day before its fourth profit warning in just over a year, as it struggles to cope with shrinking demand for marine engines and declines in its aero-engine business, where fewer of its older, more profitable engines are bought or require servicing.
Rolls-Royce said the new agreement with its AMCs would improve customer service and the shareholding changes would help simplify its business.
"The existing geographic territory-based arrangements used by Rolls-Royce to direct maintenance, repair and overhaul (MRO) work to each AMC will be replaced with a competitive model where each AMC will need to compete," the company said in a statement.
East will on Tuesday present an update of an operating review he has been carrying out on Rolls-Royce.
Shares in Rolls-Royce traded up 2.3 percent on Monday, reflecting hopes the company could benefit from higher defence spending in Britain. (Reporting by Sarah Young; Editing by Mark Potter)